Kenya’s 2025 Finance Act introduced a shift in how the Government taxes virtual asset transactions. After collecting about KSh 1.1 billion in revenue from a 3% Digital Asset Tax (“DAT”) over 21 months (September 2023–June 2025), the Government has repealed that turnover-based tax and replaced it with an excise duty on transaction fees. This change aims to align the taxation of cryptocurrencies and other digital assets with how banks and payment service providers are taxed, rather than taxing the full value of each transaction.
What was the old Digital Asset Tax?
Introduced in September 2023, the DAT was a 3% tax on the transaction value of a digital asset transfer or exchange. Designed as a withholding tax, it required any person or exchange facilitating the trade to deduct 3% of the gross amount and remit it to Kenya Revenue Authority (“KRA”). This meant that if you sold cryptocurrency worth KSh100,000, the platform would withhold KSh 3,000 as DAT regardless of whether the seller made a profit or loss on that trade. However, compliance was patchy as the tax was “loosely enforced”, and the crypto industry lobbied heavily against it, arguing it stifled the sector and would drive traders underground or to offshore platforms.
The New 10% Excise Duty on Crypto Transactions
Effective July 1, 2025, Kenya has abolished the 3% DAT on the gross value of cryptocurrency and other digital asset transactions and replaced it with a 10 % excise duty on the service fees charged by platforms facilitating those transactions. Since it’s an indirect tax, consumers don’t file excise returns. Instead, businesses collect and remit the excise duty on a monthly basis, with returns due by the 20th of the following month.
This approach is considered fairer and more efficient than taxing the transaction value. It mirrors how sales taxes or VAT works i.e. you tax the service provided, not the money itself changing hands. For example, depositing KSh 10,000 in the bank doesn’t trigger a tax, but if the bank charges you KSh 200 for that deposit, the excise duty applies to the KSh 200 fee. Until now, Kenya’s tax on digital asset trades didn’t follow this principle—it taxed the whole amount of crypto transferred, which many argued was akin to “being taxed for depositing money in a bank.”
Open questions and implementation challenges:
Who is liable?
The law specifies that the tax applies to the “owner of a platform” or “person who facilitates the exchange or transfer” of a digital asset, who must deduct the tax and remit it. This presumably targets exchanges (whether local or foreign) and possibly P2P marketplaces. How KRA will enforce this on foreign-based platforms that Kenyan residents use remains to be clarified. The upcoming Virtual Assets Service Providers Bill, 2025, is expected to introduce a licensing regime for crypto providers in Kenya, which could require those entities to register and comply with local tax laws. If major exchanges set up locally or partner with local firms, they would fall under KRA’s oversight for excise duty
Impact on revenue:
The switch to a 10% excise on fees will likely yield less revenue per transaction than a 3% tax on gross value. For KRA to collect KSh 1.1 billion again, there would need to be a very large volume of fee-based transactions. However, the government is betting on higher compliance and a growing market to make up the difference. By not over-taxing trades, the ecosystem can grow more transparently, and more players may be willing to operate within the law. As noted by industry stakeholders, this more balanced approach might keep Kenya attractive as a fintech and crypto hub rather than driving activity into the shadows.
Enforcement on overseas or decentralized services:
Finance Act, 2025 amended Section 5(d) of the Excise Duty Act to expressly bring within scope excisable services offered in Kenya by a non-resident over the internet, an electronic network, or through a digital marketplace. In practice, this means that non-resident crypto platforms that provide exchange, transfer, brokerage, wallet or similar facilitation services to Kenyan users are liable to Kenyan excise duty on the fees they charge, even if they have no physical presence in Kenya.
Accordingly, where a non-resident exchange charges a Kenyan user a trading, withdrawal, deposit, spread, or convenience fee, that fee falls within the excise net and should be accounted for and remitted to KRA . Enforcement may leverage existing rails and identifiers used in Kenya’s digital-tax regimes (e.g., local billing addresses, KES settlement, Kenyan phone numbers, bank/mobile-money interfaces), together with any licensing or onboarding obligations that may arise under the forthcoming VASP framework.
Peer-to-peer and DeFi edge cases: if a user trades purely P2P (wallet-to-wallet) without any platform or intermediary charging a fee, there is no explicit excise based on that leg of the transaction. However, any facilitation fee, spread/markup, or protocol/front-end charge taken by an operator that “owns” or “facilitates” a platform used by Kenyan users would be excisable. Where a service is truly decentralized with no identifiable person liable under the Act, practical enforcement remains challenging; by contrast, front-end operators, aggregators, custodians, and on/off-ramps that interact with Kenyan users and charge fees will typically be in scope.
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